Posts Tagged ‘tax’

I’ve been publishing UK tax graphs since the 2008-2009 tax year. It is easy to find tax information in the official government tables, but it is very hard to find simple graphs that show that the numbers mean in simple terms which is why I make these graphs. I missed out last years graphs so this year I will include the 2011-2012 and the 2012-2013 tax years. The 2010-2011 tax year is also included for comparison.

First of all here is an overview of the overall percentage of tax paid for salaries up to £200,000. The percentage for the 2011-2012 and 2012-2013 years jump mainly because of the national insurance rate increasing from 1% to 2% for earnings above the upper earnings limit.

At the more average end of the salary scale the change between the years is more affected by the increase in the personal allowance.

Here is a closer look at the income tax. It shows that the changes between these years have been fairly minor. There is always a lot of talk about tax changes in the budget, but in reality things don’t change much.

The national insurance graphs show a larger change for higher earners since the 2011-2012 tax year because of the 1% rate increase.

And finally two charts showing the absolute change in pounds paid as tax during these two tax years. These show that taxes for average earners have been decreasing, and taxes for higher earners have been increasing.

Straight after putting up the tax graphs for 2009-2010, I’m putting up the tax graphs for this tax year. This time the graphs are better, and some of them include a comparison line with the previous year’s figures.

As before I’ll state I’m not an accountant or tax expert so I can’t guarantee their accuracy, but I’ve done my best. The graphs assume that you are getting the default allowances. Let’s start with an overview of how much tax you’ll pay.

The big change for this year is the new higher 50% rate of tax, and the tapering off of your personal allowance once you reach the income limit. For most people this has no impact, it is only once you start getting over £100,000 that your tax will rise. You can clearly see the change in tax by comparing the red and blue lines in the graph.

Next is a more visual way of seeing the tax changes. The first slope is where the personal allowance tapers off, and the next one is where the 50% tax band kicks in.

Income tax and national insurance

The overall tax you’ll pay is composed of income tax and national insurance. Here are two graphs showing how much of each one you’ll be paying.

Gross salary vs net salary

Here is a graph showing your gross salary vs your net salary.

And a more zoomed in version which only goes up to £60,000.

Percentage of tax

And finally I have a graph showing the percentage of tax you pay against your gross salary. You can see that the new tax changes have made the shape more uneven (i.e. more complicated) than in the previous tax year. This is sure to be good news for accountants!

Here are some graphs showing income tax, national insurance, total tax and percentage of tax for the 2009-2010 tax year. I have also included a graph showing how total taxation has changed from the 2008-2009 tax year. If you want tax graphs for the current tax year go to my 2010-2011 tax graphs page.

I’ve done my best to make these accurate; however I’m not a tax expert so I can’t guarantee these are correct. These are therefore just for interest, and not for serious use.

2009-2010 income tax

First up income tax – everyone’s favourite tax!

After a short tax free allowance you can see how the basic rate of tax hits, and then the higher rate of tax causes the angle to increase.

2009-2010 national insurance

National insurance follows a different shape as once you reach the higher band the rate drops to 1% rather than increasing.

2009-2010 total tax

This graph combines both the income tax, and national insurance to show the total amount of these taxes that you would be paying.

And here is a version that is more zoomed in – it only goes up to £60,000.

2009-2010 percentage of tax

Perhaps more interesting than the amount of tax you pay, is the percentage of tax you pay. This graph shows the combined income, and national insurances taxes against gross salary. The dip somewhere after the £40,000 level is due to the national insurance dropping to the 1% rate before the higher rate of income tax kicks in.

Change in tax from 2008/09 to 2009/10

This final graph shows how the amount of tax you pay has changed from the previous tax year, to the 2009/10 tax year. You can see that the amount of tax to be paid has actually decreased. This is due to the increase in personal allowance for 2009-2010.

If you need to file a self assessment tax form in the UK to work out your income tax you have a number of options. You can fill in a paper tax return, do the online return, use some 3rd party tax software, or pay someone else to do it for you.

I’m going to show you what the HMRC online self assessment forms are like, from the beginning to the end.

To start off you log into the system and choose the option to ‘File a return’.

You’ll get an explanation of who can use the online self assessment, and who can’t. As long as your financial isn’t too exotic you should be able to use the online tax forms.

To get started you’ll need to confirm some personal details about your name, national insurance number, etc. Most of these should have been filled in for you already, so you only need to update them if necessary.

In the ‘Tailor your return’ section you need to enter some high level details about your financial situation, such as whether you are employed, self-employed, have received bank interest, have other income, and more. The answers to these questions will set up which parts of the form you’ll see later on. Don’t worry too much about getting your answers correct first time. Up until the point that you make the final submission, you can go back and change any parts of the self assessment form later.

If you are stuck on any section you can click on the green question marks next to the boxes, and you’ll get a pop-up with help messages in it.

I’ve produced some graphs using data about the 2008 – 2009 UK tax situation (I also have tax graphs for 09/10 and 10/11).

I’ve tried to make them accurate but beware that I’m not a tax expert so there could well be errors. They have been created for interest only, not for serious use.

The first graph is showing how much income tax you pay depending on how much you earn. This graph is based on the standard un-adjusted tax free allowance of £6305, a 20% band for the next £34800 and 40% after that.

Next is a similar graph but for national insurance contribution. I’ve used £105 per week as being free from NICs, 11% for £105-£770 per week and 1% after that.

The third graph combines the total of the two to show the total taxation.

The final graph shows what percentage of your gross income you pay as tax. The interesting shape is caused by the National Insurance contributions changing to 1% before the 40% tax band kicks in.

You may spot that when your salary reaches just over £40k the percentage of salary that you pay in tax actually goes down by a very small amount before going back up again.

For 05-06 I was able to use the HMRC free online self-assessment tax form which proved to be very easy to fill in and which did most of the tax calculations automatically. This year I wasn’t able to do this as I needed to fill in the Capital Gains Tax supplement. This supplement isn’t included in the sections available on the HMRC free online tax software.

There were therefore two option:

Fill in the paper forms. Complicated, not fun, and easy to screw up.

Investigate some 3rd party software to fill in the tax return.

The Inland Revenue has a list of approved software listed on their website. The software from ftax looked the best to me – they have a demo on their site if you want to see. The look and feel is identical to the paper forms. It allows you to fill in the main form and all the supplemental sections.

I purchased the software and downloaded it to my desktop. I went to my desktop and was expecting to find an exe or a zip file. I could find anything that looked like an installable application so I went back to the ftax site and downloaded it again.

Once more I could see nothing that looked like an install file for this software. I did however spot a PDF called SA2007. I was puzzled as I was expecting some software to be downloaded, not a PDF.

I opened the PDF and it became clear. This is no static, dumb PDF. This is the King of PDFs. You can fill in fields, save the data and press buttons to calculate your tax figures, and to submit your final return. It really is an amazing use of the PDF file format, I never realised PDFs could do this kind of thing. Many of the tax calculations are automatically done for you which makes it really easy to fill in. There is a lot of field validation in there as well, so you don’t mess up the form as you can easily do with the paper version.

The official (and free) HMRC software also does automatic calculations and validation, but if you need to fill in any supplemental pages that aren’t covered by the free software then I can definitely recommend a package like this. I haven’t yet submitted my return so I won’t be fully convinced until I have my submission receipt from HMRC but it is looking good so far.